Siemens to separate Mechanical Drives business

Reuters Staff

2 Min Read

Siemens logo is pictured at a building of the manufacturing plant of Siemens Healthineers in Forchheim near Nuremberg, Germany, October 7, 2016. REUTERS/Michaela Rehle

FRANKFURT (Reuters) - Siemens (SIEGn.DE) is splitting off its $2 billion Mechanical Drives unit, classified in past years as an underperforming business, as a standalone company better able to serve its customer base of small businesses.

The unit - which makes gearboxes and couplings for wind turbines, ships and heavy machinery and employs 6,000 people - will continue to operate under the Siemens umbrella, the Munich-based industrial group said in a statement on Thursday.

Mechanical Drives follows a well-worn path of Siemens activities that have been given operational independence, usually as a precursor to a legal separation followed by a sale or spin-off.

Former semiconductor unit Infineon (IFXGn.DE) and lighting unit Osram (OSRn.DE) are early examples. The latest is Healthineers, which is expected to become one of Germany’s biggest public listings.

“MD’s market, which is dominated by medium-sized companies, is currently characterized by weak growth, increasing competition from the Asian region and overcapacities, with correspondingly high price pressure,” Siemens said.

Mechanical Drives is part of Siemens’ Process Industries and Drives division, its least profitable business with a margin of 6.4 percent last quarter. It made just under 20 percent of the division’s sales of 9.04 billion euros ($9.63 billion) last year.

A Siemens spokesman said the business had improved strongly in the past couple of years and was now competitive.

It was not immediately clear whether it was still classified as one of the group’s underperforming businesses, which account for about 14.5 billion euros in revenue, and have an average profit margin of 4.5 percent.

Siemens said it planned to invest in Mechanical Drives’ locations worldwide and its product portfolio.